The first thing Linda Hill noticed when she walked into Pixar Animation Studios was the energy. Pixar’s cavernous office in Emeryville, California, is totally open and organized around a huge central atrium, allowing a diverse group of artists, animators, computer scientists, and managers to move and mix freely. It hummed with activity. On a tour that first day, she was struck by just how animated the animation studio was—with frank discussions and heated arguments in every corner.

And yet, as she spent more time there, she began to discern a commonality of purpose that belied the differences in background and perspective. Despite the obvious passion, everyone seemed to get along, pulling together around the common purpose of making exceptional family films. “There was this sense of community, this unbelievable sense of ‘we are one,’” Hill says. And it worked. Her 2005 visit came at the end of the studio’s decade-long string of successes that included Toy Story, Monsters, Inc., and Finding Nemo—each movie breaking new ground in its own way, pushing the boundaries in terms of both technology and storytelling.

It was exactly the kind of place Hill had been searching for. As the Wallace Brett Donham Professor of Business Administration, she’d taught Harvard’s leadership course during the 1990s, but had begun to suspect that the visionary model of leadership on which it was based wasn’t ideal for creating a culture of innovation. At the same time, the environment had changed dramatically over the course of the decade she’d taught the course—with globalization, the Internet, and mobile technology all increasing the pace of business and making innovation essential. In her quest to find new models, she had interviewed many forward-thinking executives—but as much as people were talking about innovation, few were talking about how to lead innovation. The managers she spoke with seemed to eschew most business books on leadership. “The first paragraph always says you have to ‘have a vision,’” says Hill. Working on the cutting edge, though, means that—by definition—leaders don’t know what the answer is. They have to act, not plan their way forward.

Hill began to despair of finding an answer to her problem until a chance meeting with Pixar executive Greg Brandeau in the lobby of a biotech firm—Hill was there for research, Brandeau for a job interview. Hill explained her hunt to Brandeau. “If you really want to learn about leadership and innovation, you should come to Pixar,” he told her.

In interviews with CEO Ed Catmull and Pixar leadership, Hill found an inclusive, democratic management approach that thrived on tapping all available resources. Executives talked about generating “tens of thousands of ideas” for each film, and “allowing” creativity to burst forth. She left excited, wanting to know more about how all that creative energy was harnessed to create one hit film after another. So started the journey that ended more than a decade later with Collective Genius: The Art and Practice of Leading Innovation—a new kind of business book that isn’t as much about creating a vision as it is about shaping a context.

Over time, it became clear to Hill that Pixar’s leaders didn’t profess some great vision that they expected others to follow. Rather, they created an environment in which employees were inspired to express their own ideas—even the half-baked ones.

Sitting in her office on the third floor of Morgan Hall on a sunny summer day, Hill is a flurry of creative energy herself. Just back from a trip to Hong Kong to teach an executive education course before leaving for California in the morning, she arrives carrying a pile of books and papers. She’s considered one of the School’s preeminent management “gurus,” a title that has inevitably attached itself to her ability to channel the intangibles of leadership.

She sits down and takes a breath, then begins to recount her first excited trips to unlock the paradox of what made Pixar special. At the time, the company was in the midst of producing the movie Ratatouille—an unlikely story about a rat in Paris who yearns to be a gourmet chef. Hill began to get her first inkling when she sat in on the “dailies,” group meetings to critique and discuss a film in progress. Many film studios have dailies, but few pack a room as full of people as Pixar does. The ground rules for the meetings: the understanding that everything in the film would be open to revision until the entire film was complete; and the precept that anyone in the room, from the CEO to an assistant animator, would be equally welcome to offer feedback.

She watched as emboldened staff offered their suggestions for tweaks to characters and plot points—some subtle, others daring—and as other equally emboldened staff shot down ideas and offered counter-critiques. While discussions sometimes got heated, she noticed that participants were careful to critique a person’s ideas and not the person (another rule). Although messy and sometimes chaotic, the discussions almost invariably resulted in more creative ideas that improved the movie in the long run.

Over time, it became clear to Hill that Pixar’s leaders didn’t profess some great vision that they expected others to follow. Rather, they created an environment in which employees were inspired to express their own ideas—even the half-baked ones. These were the creative building blocks that contributed to an innovative whole. Instead of a cult of personality around a leader who compelled other people to follow, this kind of leadership was based on virtually the opposite—setting up structures that would allow employees to flourish, so each person would feel responsible for his or her contributions to the greater purpose. “Part of building an organization that is willing and able to innovate almost means fighting your own talents, stepping back, and making room for other people to thrive,” Hill says.

Illustrations by Gary Taxali

Hill chose the phrase “collective genius” to describe the kind of leadership she saw at Pixar and assembled her own collective to research it. The team included her then–research associate Emily Truelove and Pixar executive Brandeau, who contributed his own understanding of what it was like to operate in this new style of leadership. The writing team also added business executive Kent Lineback, whose executive experience included roles at the Corporation for Public Broadcasting and Harvard Business School Publishing before he turned to executive coaching and writing. Together, the authors identified 16 leaders in industries as diverse as automobiles and pharmaceuticals and began to interview and observe them to see how they created environments ripe for innovation. “We didn’t want to just espouse platitudes,” Hill says. “We wanted to tell full stories, so people could see how this was done and then figure out how it applied to their own businesses.” Hill and her coauthors visited each of the leaders personally, observing how they worked and talking with them about what they saw as their roles in their respective companies.

As they sifted through the interviews and data, they realized there are two parts to creating an environment for innovation: first, employees have to be willing to innovate; and second, they have to be able to innovate. That first ingredient, willingness, came about as a result of creating a community with a common sense of purpose such as the one Hill observed at Pixar. The question was how to do it. At Indian electronics firm HCL Technologies, incoming CEO Vineet Nayar inherited a once-great technology company that had lost its way by the time he took over in 2005. The company had steadily lost market share to competitors, and employees were demoralized. Nayar began a radical five-year company transformation sparked by a simple idea: “Employees First, Customers Second.”

Through a series of initiatives, Nayar focused on developing new ways for employees to communicate, air their challenges and grievances, and review one another to keep each other accountable. The new employee focus encouraged workers to recast themselves as leaders responsible for change, and they began offering innovative ideas for how to turn the company around. Within six months, HCL had secured a new $330 million contract, and by the time Nayar left in 2013, annual revenues had increased by a factor of six—from $764 million to $4.7 billion.

“Leaders must avoid the urge to answer every question or provide a solution to every problem,” Nayar explained to Hill. “Instead, you must start asking questions, seeing others as the source of [innovation] … The greatest impact is that it unleashes the power of the many and loosens the stranglehold of the few, thus increasing the speed and quality of innovation and decision-making.”

Key to creating a willingness among employees to innovate is fostering a sense of being part of something larger than themselves. “When you build a sense of community, people can align themselves around a shared sense of purpose,” says Hill. Such was the case with Luca de Meo, who became head of marketing for Volkswagen (VW) in 2010. When he surveyed the landscape internationally, de Meo found that VW meant different things to customers in different places. He needed the marketing teams—which were spread out over 154 countries—to align themselves around a common goal and develop more collaborative ways of working.

De Meo brought colleagues from all over the world together in a series of “codesign labs” to help the company build the kind of creative community culture that could produce an innovative, coherent brand image. One of the strongest ideas that emerged from the labs was a desire to focus VW’s existing sustainability initiatives into a marketing concept called “Think Blue,” referencing the color of VW’s logo as well as the color of the sky, the ocean, and new opportunity. The company united around the idea of making VW a world leader in sustainability—a concept that De Meo called the “new battlefield of innovation and therefore the key to staying ahead of the game.”

By creating that sense of purpose, the campaign excited and united employees. By 2012, sales had increased by nearly 50 percent, and VW’s brand ranking had climbed from No. 55 to No. 39. Based on consumer surveys, brand monitor Interbrand selected VW as the top environmental brand in 2012.

While creating such willingness to innovate is an important part of a leader’s mission, says Hill, it is insufficient without creating the ability to innovate as well. As Hill and her coauthors analyzed data from the organizations they followed, they identified three capabilities each exhibited, which they call “creative abrasion,” “creative agility,” and “creative resolution.”

Creative abrasion was what Hill had witnessed at Pixar—amplifying differences to create a marketplace of ideas through discourse and debate. After all, creative organizations are all about celebrating the opinions of people whose thinking diverges from the mainstream. While it’s important to impose some constraints on that creativity, Hill has found that most firms err on the side of too much limitation. “If you have talented, passionate people, it’s going to get pretty crazed at times. But if you don’t allow that creativity to be expressed, you are going to be leaving ideas on the table.”

The other two skills are about the flip side of that creative output: creative agility is the ability to effectively experiment and learn; creative resolution is about making decisions that prevent simple compromise or domination by one group—then integrating the best elements of disparate, even opposing, ideas.

In the mid-2000s, Google was outstripping its storage capacity as it began adding applications like Gmail and YouTube to its portfolio. Engineering SVP Bill Coughran encouraged innovation to redesign the storage system, eventually green-lighting two groups to pursue two different experimental approaches, one to build a new storage stack on top of the existing storage, the other to build a new storage framework from scratch.

After prototyping, the team working on the second approach realized their design couldn’t meet Google’s emerging storage needs. But Coughran kept the group’s ideas alive, folding them into a group researching a next-generation storage framework.

The best results occur, Hill says, when leaders are able to exercise “both–and” thinking instead of “either–or” thinking, making firm business decisions and imposing restraints without shutting down creativity. “Constraints can be an important part of the puzzle. They ensure that ideas are not only creative, but also solve the problem. And they can make it easier to engage in future creative collaborations,” she says. But leaders must tread carefully. “When you think about structure, ask yourself: Does it help people collaborate better on decision-making and create more discovery-driven learning?”

As Hill and her colleagues researched these diverse leaders and sought to learn what they could from their leadership, they found themselves practicing what they were preaching—collaborating to create their own innovations and integrate them into a practical framework. “We had very deep abrasion,” Hill laughs. “But there was also this strong common purpose in that we all wanted to generate better leadership in the world.”

Among them, the four coauthors represented four different decades, both genders, and a variety of perspectives—including Hill’s academic background, Truelove’s Millennial perspective, Lineback’s crisp-thinking executive mindset, and Brandeau’s hands-on creative experience. They took turns writing chapters, with Hill and Truelove often writing first drafts and then passing them along to their coauthors to shape, expand, and improve.

In all, it took them almost a decade to collect the data and write the book—so long that in the meantime Truelove nearly finished a PhD and Hill and Lineback collaborated on another book (Being the Boss, 2012). “We kept working and working at it until we had refined it,” says Hill of the process. Having such a wealth of examples and diversity of perspectives, says Hill, allowed them to create a much more powerful book than any one of them could have produced alone—their own bit of collective genius.

The companies Hill and her collaborators studied ranged from online auction sites to pharmaceutical giants. But their executives all instinctively understood something about the nature of collaborative leadership. Here are three lessons learned:

COMPANY: eBay GermanyLESSON: Sometimes creativity needs handcuffs (or constraints can be good)
Faced with flagging sales, eBay Germany’s staff began to pursue unsanctioned “micro-projects”—experiments that resulted in such innovations as the “Buy It Now” button. Eventually, leaders implemented a system for prioritizing, monitoring, and terminating projects to make sure they fit with customer needs. “Structure can make playing around more powerful,” says Hill. “But you have to ask yourself, does this structure help people be creative, or is it just structure for its own sake?”

COMPANY: PfizerLESSON: Competitors can cooperate
Current HBS Senior Lecturer and former Pfizer General Counsel and VP Amy Schulman transformed the company’s network of outside law firms into an “ecosystem” called the Pfizer Legal Alliance, doing away with the sacred concept of the “billable hour” in favor of flat fees. To do so, she had to get the various competitor firms to interact differently, collaborating in ways that rivals rarely do. Their sharing even extended to proprietary information—something that lawyers (naturally) want to keep to themselves.

COMPANY: PixarLESSON: Let everyone in
At the meetings Pixar calls “dailies,” everyone from the lowest assistant animator to the CEO is allowed to give feedback—and is listened to. The process looks messy, but is crucial to generating new and surprising ideas. “Understand that everybody has a slice of genius,” says Hill. “If you don’t allow it to be expressed, you are leaving ideas on the table.”